The alternative minimum tax (AMT) is a tax system separate from the regular tax that is intended to prevent a taxpayer with substantial income from avoiding tax liability by using various exclusions, deductions, and credits.
Under it, AMT rates are applied to AMT income determined after the taxpayer “gives back” an assortment of tax benefits. If the tax determined under these calculations exceeds the regular tax, the larger amount is owed. In computing the AMT, only alternative minimum taxable income (AMTI) above an AMT exemption amount is taken into account. The AMT exemption amount is set by statute and adjusted annually for inflation, and the exemption amounts are phased out at higher income levels.
Under pre-Act law, for 2018, the exemption amounts were scheduled to be:
(i) $86,200 for marrieds filing jointly/surviving spouses;
(ii) $55,400 for other unmarried individuals;
(iii) 50% of the marrieds-filing-jointly amount for marrieds filing separately, i.e., $43,100;
And, those exemption amounts were reduced by an amount equal to 25% of the amount by which the individual’s AMTI exceeded:
(i) $164,100 for marrieds filing jointly and surviving spouses (phase-out complete at $508,900);
(ii) $123,100 for unmarried individuals (phase-out complete at $344,700); and
(iii) 50% of the marrieds-filing-jointly amount for marrieds filing separately, i.e., $82,050 (phase-out complete at […]